Tuesday, September 8, 2009

Law of one price breaks down

See this photo below. Taken at Crossword Bookstores in Bangalore
These are two different editions of the same book, Freakonomics: A Rogue Economist Explores the Hidden Side of Everything

Both are priced at Rs 290.
However, take a closer look at the edition of the book on the left. Click the image to see the full version. There are two stickers. One is the white sticker at the bottom, from Crosswords, which lists the book's price at Rs 290. Then there is the sticker above, in yellow, that lists the price as Rs 250.
Yes. One book, two prices. Not just one book, but the same book.

The Law of One Price (Wikipedia) says this:
In an efficient market all identical goods must have only one price.
The law is also not supposed to apply intertemporally, or to international goods, or where there is imperfect information.

Evidently, not here.Of course, as you would have guessed, a more mundane explanation is at hand, one that involves indolence and a lack of attention to detail.

© 2009, Abhinav Agarwal. All rights reserved.